American Victory

UBS has reason to rejoice, but its American clients don’t have as much to celebrate. The bank has avoided being fined and can continue its operations in the United States. However, thousands of account holders will see their names handed over to tax authorities.

Wednesday, three federal advisers detailed the agreement-in-principle that was announced at the end of July to pull UBS from the claws of the infamous IRS. Many voices were raised to say that the result would be good. Wrongly, no doubt.

Switzerland will not simply accelerate the process for handing over names. The agreement will, in some way, define the size of the net with which the IRS will go fishing for tax evaders. Because the big bank represents a systemic risk for Switzerland, the United States was able to take advantage of its difficulties in order to impose a quota.

In addition, the Swiss government has committed to do the same for other Swiss banks in similar situations. The French text is less explicit than the English version, and the IRS hastened to underline this element. New demands for mutual assistance have perhaps already been made.

The hour of truth will ring for the institutions that evaded taxes with business funds. Moreover, yesterday, Swiss Minister of Finance Hans-Rudolf Merz demanded that the financial market do some housecleaning.

Thus, the Americans have a good deal of reason to claim victory. By setting a precedent with the UBS case, formerly number one in global financial management, they are announcing an attack on all tax evaders. This could be good news. However, it will still be necessary to ensure that the Anglo-Norman islands, for example, will play on a level field.

That leaves the responsibility to Finma, the Swiss Financial Market Supervisory Authority. How can the supervisory body of Swiss banks continue to affirm that the former leaders of UBS have not violated Swiss law? For its criminal conduct, the bank has already had to pay US$780 million in fines and, initially, hand over 255 names, to which will be added the information of some 4,500 other clients.